On 30 July 2008 Germany's federal government
published a revised draft (Kabinettsentwurf) of an act
changing and amending the German Federal Data Protection Act
(Bundesdatenschutzgesetz). The draft act defines and
regulates scoring procedures to strengthen consumers'
(Verbraucher) access to information and describes
consumers' rights to information in case of automated
credit decisions or decisions based on scoring procedures.
One of the draft act's main goals is to regulate
consumers' information rights so they understand the
credit agencies' scoring procedures, which in many
cases relate to loan applications. These scoring procedures
measure credit risk using a standardized mathematical formula
based on a credit report. Credit agencies use several factors,
such as age, employment and marital status, and combine these
factors with other information to get a final rating for a
consumer. Factors that can negatively affect credit scores
include late payments, lack of credit history, location and
unfavorable credit card use. Banks, in particular, use credit
scores to determine whether to provide a loan and the
loan's interest rate. The draft act requires
Germany's credit agencies to inform consumers in a
reasonable way about their scoring procedures, especially in
the case of an automated credit decision, to provide consumers
the opportunity to correct their scores in the event of
misunderstandings or mistakes.
Prior to this publication, previous drafts of the act
(Referentenentwürfe) have been subject to
consultation and debate between the Federal Ministry of
Interior (Bundesministerium des Innern),
Germany's banking associations, consumer protection
agencies and other concerned parties. The main issues of
discussion include the intended extension of Section 6a of the
draft act with regard to automated credit decisions and the
disclosure of the reasoning behind a negative result in case of
a fully or materially automated decision. Furthermore, the
discussions considered consumers' information rights
stipulated in Section 34 of the draft act for scoring
decisions. The main arguments addressed to the government for
future consideration are based on regulations in the European
Data Protection Directive (95/46/EC) and the Consumer Credit
Directive (2008/48/EC) which have been, and should only be,
implemented in Germany's law on a 1:1 basis which
limits the implementation of extensive consumer information
rights. In particular the Consumer Credit Directive states
similar consumer information rights that should be considered
and reflected in the draft act. Contrary to what is stated in
the current draft act, a more transparent regulation of scoring
procedures or strengthening of consumer information rights
should not be required to avoid any gold-plating implementation
of EU Directive regulations.
It should be noted that the new draft act bears significant
changes compared to previous drafts regarding the rights and
the extent of information addressed in Section 34 clause 2 No.
2 (addressing formulas for calculating the probability of the
data, but not how results are weighted) and the precondition
for the transfer of data to the credit agencies according to
Section 28a. clause 1. Despite these changes, there are still
concerns regarding consumer information rights as they conflict
with banks' and other parties' rights to
protect their business secrets.
A trustee in bankruptcy's rights to obtain a possession order and order for sale against a bankrupt's property will not be suspended indefinitely even where there are exceptional circumstances.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).